Becker's Hospital Review

30 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 catalysts behind the revenue gains? Conversely, what were some of the major reasons behind last year's drop in profit? still have to meet our short-term financial objectives while continuing to improve the quality of care and service that we provide. JS: Acquisitions represented a big piece of the revenue growth in FY 2012 as well as continued growth in outpatient services. We completed a couple acquisitions earlier in the year, and then the Marquette transaction was finalized in September. That was a large acquisition. We operate in many diverse markets with large and small hospitals, so it's difficult to encapsulate the entire company. Hospitals are driven by local issues, local macroeconomic issues, physician relationships. At times, it is challenging to summarize broad trends because of local dynamics, but it's critical for the CFO to be a key strategic partner to the CEO and to drive future performance and help hold the organization accountable to performance standards. The single biggest reason for the decline in operating income was related to a significant increase in depreciation expenses, which were up $27 million. We made significant upfront investments in IT, which are preparing LifePoint to qualify for HITECH funding available by meeting meaningful use requirements. These capital investments typically have shorter lives, meaning they depreciate over a shorter period. In 2012, we made more than $100 million in IT investments, so those upfront investments drove bigger depreciation expenses. We ramped up physician employment, so that also put pressure on our margins in 2012. We also view this as a long-term investment by expanding physician presence in our markets and adding new services, like cardiology and oncology. Q: What advice would you give to other hospital and health system CFOs right now? What are the biggest differences between being an individual hospital CFO and a system CFO? JS: I've been both — I grew up on the hospital side as an individual hospital CFO, both at smaller and larger hospitals. Whether big or small, CFOs must encourage leaders to act as owners of the business, and the right decisions will evolve over time. The key challenge is you have to be investing for future growth while maintaining current performance. It can be conflicting at times. We're managing LifePoint for the long term, but we Q: What is the most difficult aspect of being a CFO of a large hospital chain? What are some of the toughest decisions you have to make daily, weekly and monthly? JS: Whether it is systemwide or for an individual hospital, some of the toughest decisions are ones that impact employees. Recently, we decided to adopt a shared services approach and outsource our back office functions to Parallon Business Solutions. This change will allow us to become more efficient and improve our performance in those areas. Some of our employees were hired by Parallon, but it was still a difficult decision because it impacted people across our company. However, we knew it was the right decision for the company. We always weight these types of decisions against the "High Five Guiding Principles" of the company. Also, with limited capital to deploy, it's been my experience over 25 years that there is an insatiable appetite for hospitals to spend capital. It's critical to balance capital investments. How and where to deploy capital are always difficult decisions to make, and you must balance priorities. n Save the Date! Becker's Hospital Review CEO Strategy Roundtable November 14, 2013 The Ritz-Carlton Chicago Co-chaired by Scott Becker, Publisher, Becker's Hospital Review, and Chuck Lauer, Former Publisher, Modern Healthcare To learn more visit www.BeckersHospitalReview.com. To register, visit www.BeckersHospitalReview.com/novhospitalevent.html

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